Hello, dear traders! On Friday, the EUR/USD pair fell to the 200.0% retracement level of 1.0430, then reversed, and advanced to the Fibo level of 161.8%, 1.0574. If the price bounces off this level, the US dollar will gain value and the pair will slide to 1.0430. If the pair closes above 1.0574, it will most likely extend gains, heading towards 1.0705.
Friday's macroeconomic calendar was full of important releases including data on unemployment and the US labor market. Although Wednesday's ADP report turned out to be downbeat, Friday's report on US nonfarm payrolls came as a surprise to traders who had expected a lower reading. The unemployment rate remained unchanged in November. In my view, the nonfarm payrolls report was enough for the dollar to gain strong upside momentum. It advanced to the level of 1.0430, but bulls returned to the market, and the US dollar closed lower.
On Monday, the EU reported data on activity in the services sector. A PMI covering the bloc's dominant services industry nudged down to 48.5, while the composite index rose to 47.8. However, both of these indices remain below the reading of 50 and viewed as a negative factor for the euro. Statistics on retail trade in the EU for October were also disappointing. The report showed a decrease in the volume of retail trade by 1.8% m/m and by 2.7% y/y. Thus, a fall in the euro on Monday morning was logical.
As for other news releases to be published today, traders may take notice of data on business activity in the US services sector. The fact that traders have already priced in the less important European indices gives hope for statistics from the US. In general, bulls are still taking the lead in the market, but the upside momentum will fizzle out sooner or later. Probably, this will happen this week.
According to the 4-hour chart, the EUR/USD pair continues to trade upwards, heading for the retracement level of 100.0%, 1.0638. A bounce off this level will lead to an advance in the US currency and a decline in the pair towards the Fibo level of 127.2%, 1.0173. If the pair consolidates above the level of 1.0638, it will have a chance of extending gains. There are no emerging divergences today.
Commitments of Traders (COT) report:
Last week, speculators opened 4,710 long contracts and 4,596 short contracts. The mood of major traders remains bullish. The total number of long contracts held by speculators is now 255,000, and that of short contracts - 122,000. The European currency is currently gaining value, which is in line with the COT report. At the same time, please note that the number of long contracts is twice as high as the number of short ones. Over the past few weeks, the euro has had a growing chance of adding in value, but now I wonder whether the euro has risen too much. The situation is becoming more favorable for the euro after a prolonged downtrend, so its outlook remains positive. It has managed to overcome the descending corridor on the 4-hour chart. Therefore, the European currency is moving upwards, but this is rather a long-term prospect.
News calendar for US and EU:
EU – Christine Lagarde speech
EU - Service PMI
EU - Composite PMI
EU - Retail sales
US - Services PMI
US - Composite PMI
US - ISM Services PMI
The macroeconomic calendar on December 5 mainly consists of reports on business activity. The impact of fundamental factors on market sentiment is likely to be medium today.
EUR/USD forecast and trading tips:
I recommend going short in case of a bounce off the level of 1.0574 on the hourly chart with a view to reaching the target level of 1.0430. Long positions will be relevant in the event of a rebound from the level of 1.0315 on the hourly chart with a view to reaching the target levels of 1.0430 and 1.0574. Both marks have been tested.